Abdul Razack, Judicial Member -
(1.) ASSESSES has three grievances in this appeal filed against the order of the Appellate Commissioner (AC) for assessment year 1981-82. The grievances are as under :
(i) Disallowance of claim of excise duty provision amounting to Rs. 5,51,130 claimed on the basis of show-cause notice dated 8th February, 1980 issued by the Supdt. Central Excise, Ahmedabad;
(ii) Disallowance of claim of investment allowance in respect of four items of expenditure aggregating to Rs. 13,880 mentioned in the ground No. 2(i) or alternatively to allow the said expenditure as revenue expenditure;
(iii) Refusal by the AC for admitting the additional ground for allowance of additional depreciation on the machinery purchased during the accounting year.
(2.) We shall deal each of the grievance in serial order. The facts culled out in respect of the first grievance are as under:
2.1 The Supdt. of Central Excise Duty issued a show-cause notice dated 8th February, 1980 (received by the assessee on 12th February, 1980) proposing to levy excise duty to the tune of Rs. 5,51,130. The assessee -company on the basis of this show-cause notice made a provision towards excise duty liability and reduced its profit by debiting it to the P & L account as it followed mercantile system of accounting. In the said show-cause notice, the Supdt. of Excise Duty demanded a reply and explanation before a formal adjudicating order is passed. The assessee submitted its explanation and reply on the strength of which the show-cause notice was withdrawn and cancelled as per order of the Asstt. Collector of Central Excise, Ahmedabad dated 31st August, 1982. When the assessment was processed, the Assessing Officer took note of the order dated 31st August, 1982 of the Asstt. Collector, Central Excise and he did not allow the claim of excise duty liability so made by the assessee in its account on the strength of the show-cause notice dated 8th February, 1980. Not being satisfied with this disallowance, the matter was carried before the first appellate authority under Section 246 of the Act. The first appellate authority, namely, the AC agreed with the Assessing Officer and upheld the disallowance so made. He also was of the opinion that since the Asstt. Collector of Central Excise has passed an order on 31st August, 1982 withdrawing the show-cause notice dated 8th February, 1980 issued by the Supdt. of Central Excise, there was no accrued or ascertained excise duty liability upon the assessee during the previous year relevant to the year under appeal. The assessee is not happy with this decision of the AC and now the matter rests before us for adjudication of this dispute.
The assessee's counsel Shri S.N. Soparkar submitted that on 8th February, 1980 on the basis of show-cause notice the liability accrued and fell upon the assessee and since the assessee is following mercantile system of accounting, a provision towards excise duty was made in the accounts and claimed as deduction/allowance from its profit. The lower authorities, according to Shri S.N. Soparkar, erred to take into consideration the subsequent order dated 31st August, 1982 of the Asstt. Collector of Central Excise whereby he withdrew and cancelled the show-cause notice dated 8th February, 1980 upon representation made by the assessee-company. According to the assessee's counsel, under the provisions of the IT Act, an assessee has to be assessed in respect of its net taxable income which is arrived at after the deduction and claim of the permissible expenditure in accordance with law and the Revenue authorities are precluded from taking into account subsequent events or evidence which come into existence after the close or lapse of the previous year. Since the liability fell upon the assessee and accrued during the previous year relevant to the year under appeal on the basis of the show-cause notice dated 8th February, 1980, the assessee was fully entitled to claim the same as and by way of deduction in arriving at the taxable profit. When an assessee has incurred a liability in accordance with law, then it amounts to payment in terms of the provisions of Section 43(2) of the Act. The facts of the case, according to assessee's representative, clearly warrant deduction/allowance of the excise duty provision of Rs. 5,51,130 on the basis of the show-cause notice and both the lower authorities erred in giving such relief to the assessee. To support the case, the assessee's counsel relied upon the following case laws, the details of which are as under :
(i) CIT v. Century Enka Ltd.  130 ITR 267 (Cal.)
(ii) ITO v. Sylvania Laxman Ltd.  Tax. 74(6)-124 (Delhi)(Trib.)
(iii) CIT v. Tata Chemicals Ltd.  162 ITR 556 (Bom.)
(iv) Shrikant Textiles v. CIT  81 ITR 222 (Bom.)
(v) Devi Das Madho Prasad v. CIT  63 ITR 356 (All.)
(vi) Instrumentation Engineers (P.) Ltd. v. ITO  32 ITD 406 (Hyd.)
and order passed by 'C' Bench of this Tribunal in the case of Maneklal Harilal Mills Ltd. v. ITO [IT Appeal Nos. 2888 and 2615 (Ahd.)/1984, dated 29-12-1986] relating to assessment year 1983-84 was relied wherein it has been held that on the basis of show-cause notice a liability accrues to an assessee and the same is allowable as deduction in computing the taxable profits. The assessee's counsel has also filed a copy of the order of Ahmedabad Bench 'C' of this Tribunal being R.A. Nos. 206 and 207 (Ahd.) of 1987 arising out of IT Appeal Nos. 2615 and 2888 (Ahd.) of 1984 in the case of CIT v. Maneklal Harilal Mills Ltd., Ahmedabad wherein the reference application filed by the CIT was rejected under Section 256(1) of the Act. The assessee's counsel also submitted that the assessee-company suo motu on the strength of the order dated 31st August, 1982 of the Asstt. Collector of Central Excise added back the said sum of Rs. 5,51,130 in the assessment year 1984-85, the previous year being 30th June, 1983. On this basis, the assessee's counsel made out a case that since the said amount of excise duty was written back in its account for the year ending 30th June, 1983 relevant to the assessment year 1984-85, the excise duty liability on the strength of the show-cause notice dated 8th February, 1980 deserves to be allowed for the assessment year 1982-83, which is the year under appeal. In the end, it was strongly urged by the assessee's counsel that the order of the AC impugned in the present appeal be reversed in respect of this grievance.
(3.) THE Departmental Representative Shri M.S. Rai relied upon the elaborate reasons given by the Appellate Commissioner in the impugned order. It was further submitted by Shri Rai that the Revenue authorities including this Tribunal is competent to consider and take into account the subsequent events or evidence which could establish that the claim made by the assessee was not in accordance with law or that the liability or expenditure claimed by the assessee was not at all ascertained or accrued liability or expenditure and, therefore, justified in negativing the claim made by the assessee-company. It is incorrect to say, submitted Shri Rai further, that the Assessing Officer and the appellate authorities including this Tribunal should not look into the subsequent events or evidence and should only be guided by the situation which prevailed during the previous year. THE Departmental Representative repelled the arguments made by the assessee's counsel and submitted that the case laws relied upon by him are distinguishable and cannot help the assessee's case. THE assessee cannot get relief in this appeal for the simple reason that the assessee has written back the sum of Rs. 5,51,130 in the subsequent previous year on the basis of subsequent order dated 31st August, 1982 of the Asstt. Collector of Central Excise and the assessee is not entitled to the allowance of the claim of Rs. 5,51,130 being excise duty provision created on the strength of show-cause notice dated 8th February, 1980 which never existed when the assessment was being completed. According to the Departmental Representative, appeal of the assessee-company has to be dismissed.;